question
Larry's Lunchcart is a small street vendor business. If Larry makes 15 pretzels in his first hour of business and incurs a total cost of $16.50, his average total cost per pretzel is..
answer
$1.10
question
Riva crafts and sells hard cider as a part-time job. She can bottle and sell four cases in a week. She is considering hiring her friend Atul to help her. Together, Riva and Atul can bottle and sell seven cases per week. What is Atul's marginal product?
answer
3 cases
question
Tom quit his $65,000 a year corporate lawyer job to open up his own law practice. In Tom's first year in business his total revenue equaled $150,000. Tom's explicit cost during the year totaled $85,000. What is Tom's economic profit for his first year in business?
answer
$0
question
Sonia opened a yoga studio where she teaches classes and sells yoga clothing. Variable costs for Sonia's yoga studio include the cost of the
(i) tank tops.
(ii) wages paid to the other yoga instructors.
(iii) lease on the studio space.
(iv) insurance that the landlord requires Sonia to carry for the studio.
(i) tank tops.
(ii) wages paid to the other yoga instructors.
(iii) lease on the studio space.
(iv) insurance that the landlord requires Sonia to carry for the studio.
answer
(i) and (ii) only
question
If Franco's Pizza Parlor knows that the marginal cost of the 500th pizza is $3.50 and that the average total cost of making 499 pizzas is $3.30, then
answer
average total costs are rising at Q = 500.
question
Economies of scale occur when a firm's
answer
long-run average total costs are decreasing as output increases.
question
The Big Blue Sky jet company has long-run total costs of $20 million if it produces 5 jets and long-run total costs of $24 million if it produces 6 jets. The Big Blue Sky jet company is experiencing
answer
constant returns to scale.
question
The minimum points of the average variable cost and average total cost curves occur where the
answer
marginal cost curve intersects those curves.
question
The firm will earn a positive economic profit in the short run if the market price is
answer
above $6.30.
question
Which of the following industries is least likely to exhibit the characteristic of free entry?
answer
satellite radio
question
Which of the following statements best reflects a price-taking firm?
answer
If the firm were to charge more than the going price, it would sell none of its goods.
question
A competitive market is in long-run equilibrium. If demand decreases, we can be certain that price will
answer
fall in the short run. All, some, or no firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium
question
If the market price is $10, what is the firm's total revenue?
answer
$50
question
The firm will earn zero economic profit if the market price is
answer
$6.
question
In a competitive market the current price is $5. The typical firm in the market has ATC = $5.50 and AVC = $4.50
answer
In the short run firms will continue to operate, but in the long run firms will leave the market.
question
Which of these types of costs can be ignored when an individual or a firm is making decisions?
answer
sunk costs
question
Comparing marginal revenue to marginal cost
(i) reveals the contribution of the last unit of production to total profit.
(ii) is helpful in making profit-maximizing production decisions. (iii) tells a firm whether its fixed costs are too high.
(i) reveals the contribution of the last unit of production to total profit.
(ii) is helpful in making profit-maximizing production decisions. (iii) tells a firm whether its fixed costs are too high.
answer
(i) and (ii) only
question
Mr. Rogers sells colored pencils. The colored-pencil industry is competitive. Mr. Rogers hires a business consultant to analyze his company's financial records. The consultant recommends that Mr. Rogers increase his production. The consultant must have concluded that Mr. Roger's
answer
marginal revenue exceeds his marginal cost.
question
Refer to Table 14-11. If the firm is producing 3 units of output, it should produce
answer
more units of output because its marginal revenue is greater than its marginal cost.
question
A perfectly competitive firm produces where
answer
marginal cost equals price, while a monopolist produces where price exceeds marginal cost.
question
Drug companies are allowed to be monopolists in the drugs they discover in order to
answer
encourage research.
question
After the patent runs out on a brand name drug, generic drugs enter the market. What happens next in the market?
answer
Price decreases, and total surplus increases.
question
Which of the following is not a reason for the existence of a monopoly?
answer
diseconomies of scale
question
Refer to Figure 15-7. In order to maximize profits, the monopolist should produce
answer
12 units
question
Refer to Figure 15-7. In order to maximize profits, the monopolist should charge a price of
answer
$20.
question
Refer to Figure 15-7. A profit-maximizing monopolist would earn profits of
answer
$120.
question
If a monopolist faces a constant marginal cost of $5, how much output should the firm produce in order to equate marginal revenue with marginal cost?
answer
4 units
question
When a certain monopoly sets its price at $8 it sells 64 units. When the monopoly sets its price at $10 it sells 60 units. The marginal revenue for the firm over this range is
answer
$22.
question
Which area represents the deadweight loss from monopoly?
answer
J+H
question
Consider a profit-maximizing monopoly pricing under the following conditions. The profit-maximizing price charged for goods produced is $12.The intersection of the marginal revenue and marginal cost curves occurs where output is 10 units and marginal cost is $6. The socially efficient level of production is 12 units. The demand curve and marginal cost curves are linear. What is the value of the deadweight loss created by the monopolist?
answer
$6
question
The deadweight loss that arises from a monopoly is a consequence of the fact that the monopoly
answer
quantity is lower than the socially-optimal quantity.
question
Suppose executives at an art museum know that 100 adults are willing to pay $12 for admission to the museum on a weekday. Suppose the executives also know that 200 students are willing to pay $8 for admission on a weekday. The cost of operating the museum on a weekday is $2,000.Refer to Scenario 15-9. How much profit will the museum earn if it engages in price discrimination?
answer
$800
question
Which of the following is not an example of price discrimination?
answer
An ice cream parlor charges a higher price for ice cream than for sherbet.
question
The reason to regulate utilities instead of using antitrust laws to promote competition is that a utility is usually a
answer
natural monopoly.
question
The firm has total fixed costs of $9 and a constant marginal cost of $3 per unit. The firm will maximize profit with
answer
15 units of output.
question
A monopolistically competitive market is characterized by
answer
differentiated products, but not long run profits.
question
Suppose that monopolistically competitive firms in a certain market are earning positive profits. In the transition from this initial situation to a long-run equilibrium,
answer
each existing firm experiences a decrease in demand for its product.
question
Which of the following examples illustrates an oligopoly market?
answer
a city with two firms who are licensed to sell school uniforms for the local schools
question
If both stores follow a dominant strategy, Lopes's annual profit will grow by...
answer
$1.0 million.
question
A group of firms that act in unison to maximize collective profits is called a
answer
cartel.
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